Given the lack of transparency, prevalence of entrenched high-cost intermediaries, a limited investor base, and wide-spread lack of accountability, there is a substantial opportunity for a technology-driven platform to replace intermediaries and provide:
- access to a broad investor base and a trusted storage solution.
BCE Platform Overview
BCE Platform and its related tools and processes will facilitate the transformation of an antiquated and inefficient financing and accounting process into a transparent, frictionless, automated system with enhanced liquidity for a new class of investors.
BCE’s mission is to be the gold standard for financing, accounting and making payments in the mining industry. Its goals are to:
- create a comprehensive Blockchain-based system for managing the entire economic lifecycle of a mining project;
- establish a new, transparent system for accounting for and transferring funds in the mining industry, starting from Battery Metals mining as a beachhead;
- democratize the opportunity for qualified investors to participate in fair, risk-mitigated mining financing structures;
- recruit key vendors and professional service providers onto the BCE system; and
- provide investors and other mining stakeholders with timely, fair and accurate distributions of proceeds.
BCE will be developing several products and strategies to achieve these goals.
The BCE Platform will encompass:
- The BCE website, wallet, distributed application and mobile apps, each of which will permit or facilitate investment in mining projects and the ability to engage in relevant transactions;
- The smart contracts and other processes that will allow the tokenization of mining assets. The Company intends to license its Platform and related technologies to parties seeking to finance or arrange financing for their mining properties. The Company will charge fees to access the platform and utilize its tools and services.
Tokenized Asset Assembly and Tokenization
Once a Tokenized Asset (TA) has been assembled, the Platform will enable tokenization. Tokenization (see e.g. my first Internet of Tokens column http://icocrowd.com/the-internet-of-tokens/ ) is the process of converting legal rights in the Tokenized Asset into a digital token that is recorded on the Blockchain using the Proprietary Asset Tokenization Protocol (PATP), and a customizable structure of relevant smart contracts. Tokenized Asset applications would be developed as customized iterations for BCE with layered integration which can be used to tokenize any assets. That protocol uses data about the Mining project provided by the project originator and allows for expert opinions about the asset valuation so that the estimation of market valuation will be as realistic as possible. The Platform will also include automated governance, audit and escrow functionality embedded in the smart contracts. The encrypted records of the state of the data will be stored on the blockchain and investors will have view-only access rights via the distributed application GUI.
The diagram below shows how a mining project assembled into TA will be tokenized on the Platform:
BCE will create an end-to-end ecosystem for representing legal ownership of property rights and the entitlements of various participants. The tokenization of Mining project assets and the resulting creation of financial transparency when dealing with those assets will be the much needed breakthrough brought about by BCE.
Tokenized Asset Offering
Once a mining industry asset or project has been tokenized, it can be offered to investors through an Tokenized Asset Offering (“TAO”; for one of the first mentions of this term one may wish to check the publication https://www.coindesk.com/goodbye-icos-hello-taos-tokens-will-change-2018/ ). All funds raised through a TAO token sale will be stored in escrow wallets until the conditions of release have been met. The project funding mechanism will work in the following way:
- Funds that were raised for a specific project will be stored in an escrow wallet
- The only way to withdraw funds from that escrow wallet is to provide a required set of documents that will identify the amount of funds that needs to be withdrawn and for what purpose
- Disbursement approval requires signature from an independent third-party such as a completion guarantor
- Once the withdrawal is approved, the funds will be sent to the project originator’s active wallet from which all project expenses will be paid
- In order to proceed to a second withdrawal, the protocol requires all the information about the final expenses from the previous withdrawal (if all the withdrawn were used, how much is left, or did it exceed to budget and why?)
- All of this information will be partially visible to TAO token holders of that specific project or set of projects. The project investors will be informed about the progress of the project through their BCE personal accounts, where they will see a progress bar with the amount of funds that have been distributed to date and for which purposes, including a signature provided by an independent auditor.
- As the projects enter the distribution cycle, the authorized token-holders can view receivable balances and estimated revenue timelines based on real-time performance of the mining project.
BCE solution: platform for efficient mining investment
BCE will allow funders to share in the metals produced by mines via pre-purchase of those metals at a discount. Smart contracts, (specifying the rules of exchange, discounts, delivery dates, draw-down rules and other project details,) deployed via the blockchain, will be the mechanism which provides producers with the funding they need to carry out the work, and give funders transparency, accountability and liquidity.
Like so many industries, the value chain of commodity mining, processing and trading is being disrupted by companies using digital technologies to rewrite the rules of all aspects of the business. Every part of the chain, from securitization of assets (one of the ways to do it is presented in the article http://icocrowd.com/trillion-object-opportunity/ ) to the close-out of positions, is being un-bundled, redefined and rebuilt. With the combined effect of information breaking out of proprietary silos, and growing demand for many resources on the part of global industries, the time is right for the creation of a decentralized, disintermediated, global platform which answers the complex needs of the mining industry. The solution is a platform that affects frictionless funding and trading of extracted resources through smart contract execution.
The BCE Vision
Efficiently and transparently fund promising mining projects, profiting and delighting both funders and producers by providing a global, immutable crypto store of value based on physical metal.
The core concept of BCE is to build a platform to help mining projects secure funding far more quickly, efficiently and cost-effectively than it is possible today. This will be accomplished by using cryptocurrency and smart contracts to deliver accountability, transparency and liquidity for all parties.
Benefits for Funders
The funders pre-purchase metals from the mine at a significant discount.
BCE will offer both the project owners and the backers all of the benefits of a decentralized platform: lowered barriers to entry, the confidence of long-term vi-ability, simplified processes and a clear pathway to liquidity. This creates a store of value where the claim on physical metal is managed by a blockchain while the physical metal represented by the coin is in situ in the mine, being mined and processed, or stored in a highly secure location.
We believe that smart contracts provide a powerful way to solve the liquidity problem, enabling producers to fund early-stage projects and funders to participate in potentially lucrative projects while enjoying accountability and liquidity.
We are building a system, which will spread the initial high risk of exploration among many backers, enabling all of them to participate in potentially high-reward projects. The platform will be open-sourced with incentives provided for developers and others to enhance the offering with additional services, and for industry players to bring projects to the community.
The aim is to create a broad, global community of funders, many of whom have never previously invested in mining. We will provide news and information feeds and educational resources so people can easily learn about mining and understand how to access the opportunities.
BCE brings the funders and the founders together to help them efficiently meet their needs and mitigate the challenges of early-stage mining funding.
Funders want to generate a return on their funds. They typically believe that particular commodities may rise in value and understand the potential upside of funding successful mining projects at an early stage.
The key challenges for funders are largely around information. It can be hard to find prospective projects and, once a project is identified, there is the challenge of evaluating and then tracking the project. As already noted, funders often lack access to good information and, once an investment is made, generally face illiquidity for an extended period of time.
Anyone who wishes to participate in funding of mining projects can buy project coins (each of those backed by the mined resource, e.g. battery metal produced by the project) and trade those coins. This creates a frictionless, highly efficient ecosystem of peer2peer trading.
CE: Representation of Mining Rights
BCE not only represents a true store of value based on physical metal, but it can also be considered to act as a proxy for mining rights themselves. This offers the possibility to dramatically simplify and standardize management of mining rights around the world. Currently, every jurisdiction (usually state or province level, occasionally national) has its own regulations and processes relating to applying for and maintaining mining rights.
There are different terms used in each of these jurisdictions and processes vary. If BCE becomes widely accepted then these jurisdictions could instead issue BCE (or project-coins) to the miners using a standardized process. If they so desired, authorities could issue some coins to other stakeholders such as local residents, landholders, and even environmental groups with an interest in the project.
For example, in jurisdictions where Native Title is a factor (Australia, Canada, New Zealand and elsewhere), this could simplify administration, speeding up fair and equitable distribution of profits while smoothing out the management processes. The other aspect of this concept of a crypto-mining right is that holders of the token may decide to keep the store of value in the ground, rather than immediately mining it. This could happen for a number of reasons; the commodity price may fall, there may be significant environmental factors that argue against mining at present (and environmental activists may purchase sufficient coins to control the project for example) or local residents and other stakeholders may wish to delay mining for some reason. .
Hence, BCE provides a flexible means of holding and trading the value of commodities, be they in the ground or fully produced. It also allows a much wider range of funders and stakeholders to share in a project than was previously possible.
BCE pathway to capital appreciation
As we develop a strong, global platform, participants in BCE, project coins will have the opportunity to see appreciation in the coins themselves and to have the ability to fund promising commodity projects which offer real utility and upside.
Funders buy the mined resource at a significant discount to the spot price (because of the risk they are taking with delayed delivery, early stage of the project, etc). In effect, they are speculating on the project risk and the commodity.
The project coins are backed by physical metal, so they are a real store of value and can appreciate as projects move towards production and if commodity prices rise.
People who hold project coins can effectively trade metals with very low cost and high transparency and efficiency, so they can make returns if they back metals that increase in price.
Producers only draw down funds if they meet milestones based on doing work that moves the project towards production. This gives an unprecedented level of transparency for funders of mining projects.
As the platform grows and develops, we expect BCE to become a globally recognized store of value based on physical metal that is immutably owned and securely stored.
Utility of Smart Contracts
Smart contracts will allow distribution fees and distribution expenses to be paid to distributors automatically while the remaining revenues are used to timely pay other stakeholders in the waterfall. Residuals and royalties can be paid as the applicable revenues are collected, not later when they are accounted for. Investors, lenders, profit participants and all other stakeholders can be paid automatically, in accordance with smart contract waterfalls and their payments remitted on receipt rather than accumulated by the intermediaries and paid months after the end of the next accounting period.
Smart contracts created within the BCE framework will upgrade the ways in which all stakeholders are accounted to and paid, improving fairness, accuracy and timeliness throughout the industry. The BCE distributed application will host an accounting layer on Ethereum to automatically record and account for transactions among BCE’s various uses.
Subject to compliance with all applicable laws, the Company also plans to enable the BCE to facilitate the issuance, purchase and sale of security tokens used to fund smart projects assembled and tokenized on the Platform.
For each project or set of projects, the TAO will be conducted on the Exchange. The Exchange will have filters on top of the browser window containing key information about each offered product. The Company anticipates that investors will be able to choose between investing in a set of projects of mining projects, such as the BCE Conservative, Intermediate or Aggressive Funds, or in individual projects.
If a user chooses the individual Mining project option, then under the filters Mining projects will be listed one after the other, with the project’s title on the left and the key information on the right. If user chooses the set of projects option, then the user will be able to view various available set of projects developed by industry experts. The GUI will displays key information about the set of projects; the user will have to click on the set of projects to view the complete information set including committed funds, essential project details, financial and other projections, key personnel, etc.
Selected BCE Platform Benefits
- Real Time Auditing and Reporting. As revenue is generated through any transaction, the BCE dashboard will immediately report the receipt of funds. As these records are generated on the blockchain, real time auditable records will be created.
- Faster Payments. As funds flow into a transparent “bucket” that fills up and is distributed in accordance with the projects financial “waterfall,” stakeholders will receive their entitlements sooner.
- Reduced Costs. The smart contracts will reduce costs for legal, accounting and other expenses by eliminating redundant work and streamlining processes.
BCE intends to bring these benefits to all stakeholders over time, not just those currently closest to the cash. Because of its advantages, we believe that the Platform and related tools will eventually become the preferred standard for all mining industry transactions.
We believe that powerful growth in Electric Vehicles (EV) and Blockchain tools provides a great opportunity. And BCE enables investors and other stakeholders involved in mining of relevant key battery materials including lithium, cobalt and graphite to take full advantage of this opportunity!